All of the following are related to a proposed project.Which of these should be included in the cash flow at time zero?
I.purchase of $1,400 of parts inventory needed to support the project
II.loan of $125,000 used to finance the project
III.depreciation tax shield of $1,100
IV.$6,500 of equipment needed to commence the project
A)I and II only
B)I and IV only
C)II and IV only
D)I, II, and IV only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

At time zero, only the initial investment related to the project should be included in the cash flow. Therefore, options II and III do not apply. Option I is a cost related to the project and should be included. Option IV is also a cost related to the project and should be included. Therefore, the best choice is B (I and IV only).

All of the Following Are Related to a Proposed Project